---
title: "Buydown Mortgage: Buying Down Your Interest Rate"
publishDate: 2023-01-24
author: "K Hovnanian Homes"
category: buying
tags: ["buydown mortgage", "interest rates", "mortgage", "mortgage buydown"]
canonical: https://www.khov.com/blog/buydown-mortgage-buying-down-your-interest-rate/
markdownUrl: https://www.khov.com/blog/buydown-mortgage-buying-down-your-interest-rate.md
---

## **Thinking of Buying Down the Interest Rate on your Mortgage?**

### **What is a Buydown on a Mortgage?**

A Mortgage Buydown presents homebuyers, sellers, and builders with an opportunity to lower monthly mortgage payments by “Buying Down the Interest Rate” on a loan.

This is accomplished by purchasing [Discount Mortgage Points](https://www.khov.com/blog/mortgage-points-what-are-points-on-a-mortgage/) that are pre-paid at closing. The more Discount Points paid, the lower the monthly costs for the life of the loan.

## **How Interest Rate Buydowns Work**

For traditional loan programs, buyers or sellers might consider Buying Down the Interest Rates on a 30-year fixed mortgage, for example, from 6.5% to 5.99%.

Each mortgage point equals 1% of the total loan, so on a $300,000 loan, one point would cost $3,000. While points don’t affect the principal balance, reducing a loan rate by even a small percentage may add up to significant savings over time.

Plus, Buydown Mortgage costs are generally tax deductible.

## **Mortgage Buydown Options**

Those interested in scaling up to full loan payments more slowly often consider a “3/2/1” Buydown Mortgage, in which the Year 1 interest rate is lowered by 3%, in Year 2 by 2%, and in Year 3 by 1%. After that, the 30-year fixed rate takes over.

There is a similar 2-year graduated option as well, called the “2/1.”

## **Is a Mortgage Buydown the best solution for you?**

Especially in times of high interest rates, a Buydown may work perfectly! For more information please contact K. Hovnanian® American Mortgage, LLC™ at [https://www.khov.com/contact-us](https://www.khov.com/contact-us/).